FEDERAL COURT OF AUSTRALIA

Pollak v National Australia Bank Ltd [2000] FCA 683

BANKRUPTCY – bankruptcy notice – ex parte extension of time for compliance granted for short period on filing of application to set aside notice – power of Registrar – effect of failure of Registrar to extend so that time had already expired before hearing date – power of Court to extend time after its expiry – ground for setting aside raised by the existence of a Mareva injunction obtained by the creditor restraining disposition and affecting all of debtor’s assets – whether execution must be deemed to have been stayed.

JOSEPH POLLAK v NATIONAL AUSTRALIA BANK LIMITED

N 7353 of 2000

BURCHETT J

16 MAY 2000

SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

1                     In this matter, the debtor, upon being served with a bankruptcy notice, and on the last day for compliance, filed in the Registry an application to set it aside in which he also sought an extension of the time, as would, of course, be usual.  Deputy Registrars of the Court have delegated power to grant an extension, and it is the common practice that an extension would be granted ex parte for a short time to cover the position up to the date of the matter coming before the Court.

2                     It is perfectly clear, as counsel for the creditor bank reminded me, that a Registrar should not grant an extension ex parte for some substantial period.  Before a substantial extension is granted, there should be an opportunity for the creditor to argue to the contrary. And an application which, on the face of it, is simply not arguable, or plainly not justified, should not gain even the shortest extension.  The authority which makes this warning clear is Re Nguyen; Ex parte Commissioner of Taxation (1995) 54 FCR 403.  But, as I have said, it is quite usual to grant an extension ex parte for a short period, where an application is filed which, on the face of it appears to be brought bona fide.  Where it is bona fide, the debtor should obviously not be committed to an act of bankruptcy before he can get to a judge to argue the invalidity of the notice, or some other bona fide ground for setting it aside.  In the present case, unfortunately, the matter was simply set down to come before a judge, but nothing at all was done about the making of an order extending the time; so that, if that position remained unaffected by any valid order made at a later date, an act of bankruptcy would be committed virtually immediately.

3                     The debtor has given evidence that he assumed an extension had been granted within the Registry to the date that was allocated.  There was cross‑examination about this, and it does not seem to me that it is necessary to come to a firm conclusion, because even if he did not assume it, but rather simply overlooked the point, it would not, to my mind, make any difference.   One thing is clear.  I do not for one moment think that the matter was deliberately left the way it was.  So it was by an inadvertence of some kind that the extension was not granted. 

4                     The creditor bank made a search, and the search revealed the fact that the application had been made for the setting aside of the bankruptcy notice and for an extension of time.   The search also revealed no extension had yet been granted, and on that footing a petition was immediately taken out.  The matter now comes before me.  It is not yet ready for a full hearing, which, on the estimates of the parties, will take the best part of a day, but it could be ready very shortly.  Unfortunately, there are difficulties about dates.  However, the parties have been able to agree that an appropriate date for the matter to be heard is 19 June, and I fix it for hearing then at 10.15 am.  I shall, at the conclusion of these reasons, give some directions to ensure that it is ready for hearing on that day. 

5                     The matter that has been the subject of quite strenuous argument is whether, in the meantime, I should exercise the power of extending the time limited in the bankruptcy notice up to and including the day of the hearing – it is usual to make such an order until 4 pm on that day.  It was held by a majority of the Full Court, Deane and Ellicott JJ in their joint judgment in Streimer v Tamas (1981) 37 ALR 211 that, in circumstances such as these, the Court does have the power to grant an extension of time, notwithstanding the original time has already expired.  In an extremely recent decision of the High Court of Australia, Guss v Johnston (2000) HCA 26, at paragraph 58, footnote 13, and paragraph 63, it was made clear that Streimer v Tamas is good law. 

6                     The question, therefore, is how I should exercise my discretion having regard to the evidence.  Mr Aldridge SC, who appears for the debtor, has put forward a number of grounds on which he relies. Firstly, although the original debt founding the bankruptcy notice was the subject of an order affirmed by a Full Court of this Court, a special leave application is outstanding in the High Court of Australia and, it would appear, is likely to come on about September of this year.   Of course, the prospects that special leave will be granted can rarely be stated by a single judge with assurance, but they might, in this case, fairly be regarded as quite small. However, Mr Aldridge is not dependent solely on that ground.  There are numbers of departures in the bankruptcy notice from the prescribed form, many of which seem quite technical and might very well be the subject of an application of s 306 of the Bankruptcy Act 1966, but to some of which Mr Aldridge would be able to address serious submissions.

7                     Then there is a question which Mr Aldridge raises as to which courts have given various answers in differing factual circumstances, more or less comparable to the present, and which, I am told, is the subject of a presently reserved decision of Mathews J.  The question arises in this way.  The bank sought relief in the nature of Mareva relief against the debtor some time ago, and an order, dated 21 December 1998, was made by Tamberlin J against the debtor in the following terms:

“The Court orders that until further order [the debtor] be restrained from selling, disposing of or dealing with any interest in any assets whatsoever and wherever situated in which [he has] any interest without giving the solicitor for the Applicant [that is the bank] at least 28 days prior written notice.”

It is pointed out that the bankruptcy notice allows less than 28 days for payment, and that this order, affecting all of the assets of the debtor, would literally provide a complete bar to his compliance with the bankruptcy notice. 

8                     The cases as I have indicated, have discussed various situations more or less similar to this, but neither counsel has put to me a case precisely on all fours.  I have myself granted, in the past, an order setting aside a bankruptcy notice where an order sequestrating assets had been made at the suit of the creditor by the Family Court, and then the creditor had issued a bankruptcy notice, she being the wife of the debtor:   Holden, Re; Ex parte Holden (1989) 13 FamLR 328.  Reference was made to a judgment in Re Boscolo; Ex parte Botany Council (Jenkinson, O’Loughlin and Sackville JJ, unreported, 16 October 1996), where Jenkinson J indicated that the practical effect of the Mareva order was the dominant factor. 

9                     In my opinion, if one has regard only to this ground, it cannot be said that the debtor does not have an arguable case for the setting aside of the bankruptcy notice.  That is as far, it seems to me, as it is possible or necessary for me to go.  The question, then, is whether the possible prejudice to the bank resulting from a delay of some two months in the possible commission of an act of bankruptcy is sufficient to outweigh the obvious prejudice to the debtor of remaining a person against whom it may be said that he has committed an act of bankruptcy, with the effect that that could have on his commercial arrangements, including dealings with banks and with all the array of individuals with whom one has to deal in one's day-to-day life, from whom payments may be received or to whom payments may have to be made.

10                  I have considered the balance of these issues of prejudice carefully, and I have paid particular attention to evidence indicating that, some five years ago, the debtor did dispose of various apparently substantial assets, in particular to his wife.  The bank says there may be an effect on its ability to set aside transactions.  However, an examination of that evidence shows that if, on 19 June, the bank is successful, and the bankruptcy notice is not further extended, there would be no effect, and it is not suggested there would be any effect, on any transaction which is known.  That is the first step.  The second step is that I am satisfied that very thorough exploration of the debtor’s affairs has already occurred, and that it is extremely unlikely there is any unknown transaction which could be so affected. 

11                  Having regard to that finding, on the evidence, and the balance of prejudice, I am satisfied that I should make an order, and I do order that the time for compliance with the bankruptcy notice be extended from 26 April to and including 4 pm on 19 June.  I reserve costs.

12                   

Associate:

Dated:              24 May 2000